October 11, 2013 Practice Groups: Oil and Gas Environmental, Land and Natural Resources Energy Adapting to a New Era of Strict Criminal Liability Enforcement under Pennsylvania s Environmental Laws By David J. Raphael and Tad J. Macfarlan Attorney General Kathleen Kane s recent actions concerning the application of strict liability criminal offenses under Pennsylvania s environmental laws present a new challenge for the oil and gas industry in Pennsylvania. Attorney General Kane has recently applied the strict criminal liability provisions of the Solid Waste Management Act ( SWMA ) in the prosecution of an oil and gas operator, and there are similar provisions imposing strict criminal liability in other Pennsylvania environmental laws, including the Clean Streams Law and Air Pollution Control Act. The Attorney General s willingness to criminally prosecute under these provisions, many of which have existed since the 1980s and have, at least to date, withstood constitutional challenges on a number of fronts, may make things interesting for oil and gas operators in the Commonwealth. Of course, a broader application of those criminal provisions means that the oil and gas industry will need to establish even more rigorous internal protocols for handling spills, leaks, and even accidents that may now be viewed as crimes by the Pennsylvania Office of Attorney General. It will also require greater scrutiny of contractors and other agents who may be retained to complete environmental services for the operators. That is because the entity or person retaining those contractors may be held criminally liable under certain circumstances for the actions taken by those contractors. And finally, it may also impact how and when settlements with the Pennsylvania Department of Environmental Protection ( DEP ) should be executed. Developing and completing oil and gas wells in Pennsylvania whether they are conventional or unconventional requires proper management and oversight to ensure compliance with Pennsylvania s environmental laws. Given the breadth and complexity of those laws and regulations, this can be a formidable task. And given the cradle to grave requirements of a number of these environmental statutes, the legal requirements often extend beyond the well site, requiring operators to ensure that waste streams generated on a well site are properly processed, transported, and disposed of after leaving the well site. Now all of those activities will also need to be analyzed through a different lens to ensure the potential for criminal liability is addressed. With its broad strict liability criminal provisions, SWMA is the most powerful tool available to the Office of Attorney General relative to criminal environmental enforcement and its intersection with oil and gas operations in Pennsylvania. The statute became law more than 30 years ago and contains perhaps one of the broadest strict liability felony provisions ever enacted. 1 It also contains one of the longest statutes of limitation twenty years from the date the offense is discovered of any environmental statute. 2 What makes SWMA such a powerful tool for prosecutors is how the statutory provisions fit together and how explicit the statutory language of those provisions is. While SWMA contains a number of significant penalty and substantive provisions impacting the oil and gas industry, two SWMA criminal penalty provisions Sections 606(b) and 606(f) are of particular interest and will be discussed below.
First, Section 606(b) provides for misdemeanor penalties for violating SWMA, any rule or regulation of DEP, any order of DEP, or any term or condition of any permit issued under SWMA. Section 606(b) states: Any person other than a municipal official exercising his official duties who violates any provision of this act, any rule of regulation of the department, any order of the department, or any term or condition of any permit, shall be guilty of a misdemeanor of the third degree and, upon conviction, shall be sentenced to pay a fine of not less than $1,000 but not more than $25,000 per day for each violation or to imprisonment for a period of not more than one year, or both. 3 As the plain language of the Section 606(b) indicates, there is no intent requirement to be convicted of a misdemeanor under this provision. In other words, the Commonwealth need not prove that the defendant acted with any level of intent (or even negligence) to commit the crime. Often criminal offenses require strict proof of intentional, knowing, or reckless conduct. Under this provision, the Commonwealth need only prove that a defendant violated SWMA, an order of DEP issued under SWMA, or a term or condition of a permit issued under SWMA to be convicted of a misdemeanor. For example, residual waste leaking from a pit, tanker, drum, or other container may violate SWMA, multiple regulations, and a current permit. Each would be a misdemeanor violation. For certain SWMA provisions and certain enabling regulations, those violations continue for each day until the violation is abated. So, it is possible to incur criminal penalties at a maximum rate of $25,000 per day for each violation. If, for example, four violations occurred and were not abated for a period of time, the defendant could incur penalties at a maximum rate of $100,000 ($25,000 per violation) each day until abated. The provision also allows for incarceration in addition to the criminal fine, although given the offense gravity score for a misdemeanor of the third degree, that is unlikely for a first offense. Interestingly, the language of Section 606(b), SWMA s misdemeanor penalty provision, is identical in its language to that of Section 606(a), SWMA s summary penalty provision. 4 Under SWMA s statutory structure, the Commonwealth gets to choose whether to charge a summary offense akin to a traffic ticket, with a maximum penalty of $1,000 for all violations or the more substantial misdemeanor offense with a maximum criminal fine of $25,000 per day for each violation plus potential imprisonment for up to a year. This provides the Commonwealth and its prosecutors with extraordinary discretion. Notwithstanding the extraordinary discretion Section 606(b) provides the Commonwealth and its prosecutors, the Pennsylvania Supreme Court has upheld its constitutionality. In Commonwealth v. Parker White, 5 the Court addressed the issue of whether the penalty scheme created by Sections 606(a) and (b) violated the state and federal constitutional guarantees of equal protection and due process of law and proscriptions against delegation of legislative power to the executive branch of government. First, the Court set the context for such constitutional challenges setting forth the well-settled principle that one challenging the constitutionality of a legislative enactment (a statute) bears the heavy burden of demonstrating that it clearly, plainly, and palpably violates some specific mandate or prohibition of the constitution. 6 The Court then tackled appellants argument that Sections 606(a) and 606(b) of SWMA imposed different degrees of punishment for identical statutory violations and so created arbitrary and unreasonable classifications between similarly situated persons without a rational basis for doing so. 7 The appellants claimed that this violated the guarantee of equal protection of the law under the 14th Amendment of the United States Constitution and Article I, Section 26 of the 2
Pennsylvania Constitution. 8 In dispensing with the equal protection arguments, the Court held that Section 606(a) and Section 606(b) of SWMA had a rational basis and had a fair and substantial relation to the legitimate objectives of the legislation, and did not violate equal protection principles. 9 Based on the record of that case, the Court held that SWMA s provisions did not create a distinct class of defendants that were facing disparate criminal punishment for similar conduct. 10 The Court found that there is no equal protection infirmity in SWMA merely because the act affords the prosecutor or enforcing agency the ability to choose between two different penalty provisions for similar unlawful conduct and that a prosecutor or agency might selectively enforce the provisions of the act for improper motives. 11 Second, the Court addressed appellants due process claims framed as the unfettered discretion provided to the Commonwealth s prosecutors in choosing different penalties without sufficient guidelines under Sections 606(a) and (b), violating their rights to due process of the laws because of excessive prosecutorial discretion. 12 The Court rejected these claims and explained that Sections 606(a) and 606(b) of SWMA do not offend due process by letting prosecutors or an enforcing agency choose between ranges of penalties nor in failing to set forth precise standards narrowing the prosecutorial discretion in selecting the appropriate penalty. 13 The Court noted that SWMA, through its plain language, set forth the full range of civil, criminal, and equitable remedies and penalties to which appellants may be subjected for violating the substantive provisions of SWMA. 14 Finally, the Court rejected the improper delegation claim that Sections 606(a) and 606(b) violated Article II, Section I of the Pennsylvania Constitution by transferring a traditional legislative function defining what constitutes a crime without sufficient guidance. 15 In rejecting this claim of improper delegation, the Court looked to the declarations of policy found in Section 102 of SWMA and found that adequate standards did exist to guide prosecutors. 16 It is worth noting that the Court s legal analysis concerning the improper delegation argument is fairly limited and rests heavily on the broad proclamations of policy set forth in Section 102. Whether our current Supreme Court would reach the same conclusion is an interesting question given the limited guidance provided by Section 102 of SWMA. Since Parker White, SWMA s Section 606 has weathered various constitutional challenges attacking the broad authority of its penalty provisions under Sections 606(a) and 606(b). 17 Based on the broad and explicit language of SWMA, Pennsylvania s appellate courts have rejected such due process challenges under the federal and state constitutions. But the most recent appellate challenges have been heard only by the Commonwealth Court, our intermediate appellate court, and not by our Supreme Court. Notably, some of the most interesting and perhaps persuasive arguments concerning the constitutionality of these provisions were never made. Turning to SWMA s strict liability felony provision, Section 606(f), it is worth noting that Pennsylvania s courts have also consistently upheld its constitutionality, notwithstanding the breadth of discretion it provides to the Commonwealth and its prosecutors. Section 606(f), like its misdemeanor counterpart Section 606(b), does not require that the Commonwealth prove that the defendant acted with any level of intent to commit the crime. Section 606(f) states as follows: Any person who stores, transports, treats, or disposes of hazardous waste within the Commonwealth in violation of section 401, or in violation of any order of the department shall be guilty of a felony of the second degree and, upon conviction, shall be sentenced to pay a fine of not less than $2,500 but not more than $100,000 per day for each violation or to imprisonment for not less than two years but not more than ten years or both. 18 3
As the plain language of Section 606(f) indicates, there is also no intent element necessary to convict a defendant of a second degree felony under this provision. The Commonwealth need not prove that the defendant acted intentionally, knowingly, recklessly, or even negligently to secure a felony conviction. While most oil and gas wastes will not qualify as hazardous waste under SWMA, if the Commonwealth can prove that a defendant stored, transported, treated, or disposed of hazardous waste in violation of Section 401 or in violation of any DEP order (including a Consent Order and Agreement) issued under SWMA, the Commonwealth may secure a felony conviction. For example, under the plain language of SWMA, hazardous waste leaking from a drum may violate multiple components of Section 401 of SWMA or an order of DEP. It is, therefore, possible to incur criminal penalties at a maximum rate of $100,000 per day for each violation. If, for example, four violations involving hazardous waste occurred and were not abated for a period of time, the defendant could incur penalties at a maximum rate of $400,000 ($100,000 per violation) each day until abated. In addition, Section 606(f) provides for imprisonment for a period of not less than two years or not more than ten years. Given the plain language of Section 606(f), it is far more likely to receive a sentence of imprisonment after being convicted of a felony under this provision than under the misdemeanor provision of Section 606(b). In practical terms, there is a dramatic difference in the penalty provisions for residual waste and hazardous waste under SWMA. From a risk-management perspective, this legal reality is something that should be given thought and consideration in determining what waste streams are being stored, transported, treated, and disposed of at and from various well sites around the Commonwealth. Indeed, it may be argued that Section 606(f) is a more difficult provision to challenge than its misdemeanor counterpart, Section 606(b). First, its requirements are not identical to the elements of 606(b) or 606(a), thus limiting a defendant s ability to argue that Section 606(f) provides too much discretion to the Commonwealth s prosecutors. Second, the incorporation of Section 401, a substantive provision of SWMA, limits the ability to argue that the provision is unconstitutionally vague. Section 606(f) does not try to be both a penalty provision and substantive provision at the same time, a statutory structure that is not favored by our courts. Section 401(b) states in explicit detail the legislature s view that liability may attach concerning the storage, transportation, treatment, and disposal of hazardous waste regardless of the level of care exercised by an individual to prevent violations from happening. Section 401(b) states as follows: The storage, transportation, treatment, and disposal of hazardous waste are hereby declared to be activities, which subject the person carrying on those activities to liability for harm although he has exercised utmost care to prevent harm, regardless [of] whether such activities were conducted prior to the enactment hereof. 19 Section 401(b) s language certainly makes it difficult to argue that the legislature did not wish to create a strict liability penalty structure to address the management of hazardous waste within the Commonwealth. So, in addition to traditional compliance issues undertaken by the oil and gas industry in Pennsylvania, considering the implications of SWMA s strict liability criminal provisions and those found in other of Pennsylvania s environmental statutes is certainly wise from a risk-management perspective. How the oil and gas industry does its business will either maximize or minimize the opportunities for the Commonwealth to pursue criminal prosecutions under Pennsylvania s environmental laws. The Commonwealth certainly has the legal tools to do so and, it appears, an aggressive new policy of how it will do so going forward. 4
Authors: David J. Raphael dave.raphael@klgates.com +1.717.231.4574 Tad J. Macfarlan tad.macfarlan@klgates.com +1.717.231.4513 Anchorage Austin Beijing Berlin Boston Brisbane Brussels Charleston Charlotte Chicago Dallas Doha Dubai Fort Worth Frankfurt Harrisburg Hong Kong Houston London Los Angeles Melbourne Miami Milan Moscow Newark New York Orange County Palo Alto Paris Perth Pittsburgh Portland Raleigh Research Triangle Park San Diego San Francisco São Paulo Seattle Seoul Shanghai Singapore Spokane Sydney Taipei Tokyo Warsaw Washington, D.C. Wilmington K&L Gates practices out of 48 fully integrated offices located in the United States, Asia, Australia, Europe, the Middle East and South America and represents leading global corporations, growth and middle-market companies, capital markets participants and entrepreneurs in every major industry group as well as public sector entities, educational institutions, philanthropic organizations and individuals. For more information about K&L Gates or its locations, practices and registrations, visit www.klgates.com. This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. 2013 K&L Gates LLP. All Rights Reserved. 1 See 35 P.S. 6018.606(f) & 6018.401. 2 See id. 6018.617. 3 Id. 6018.606(b). 4 Id. 6018.601(a). 5 Commonwealth v. Parker White Metal Co., 515 A.2d 1358 (Pa. 1986). 6 Id. at 1362 (citing Snider v. Thornburgh, 436 A.2d 593 (Pa. 1981)). 7 Id. at 1362-66. 8 Id. at 1362 (citing U.S. Const. amend. XIV, 1 and Pa. Const. Art. I 26). 9 Id. at 1366. 10 Id. at 1363-65. 11 Id. at 1364-65. 12 Id. at 1366-69. 13 Id. at 1368. 14 Id. 15 Id. at 1369-70. 16 Id. 17 See Baumgardner Oil Co. v. Commonwealth, 606 A.2d 617 (Pa. Commw. Ct. 1992); Waste Conversion, Inc. v. Commonwealth, 568 A.2d 738 (Pa. Commw. Ct. 1990). 18 35 P.S. 6018.606(f). 19 Id. 6018.401. 5